Rockhopper shares soar on Falklands oil upgrade

Rockhopper Exploration has increased its forecasts for its oil well off the Falkland Islands, sending its share price soaring.

Despite rumours earlier in the week that the company's Sea Lion well was producing low grade heavy oil, the company said tests on samples brought back to the UK have shown it is "medium gravity" crude oil and there is more of it than initially expected.

According to independent oil and gas evaluations group RPS Energy, the best estimate for recoverable reserves from Sea Lion has increased to 242 million barrels of oil, up from the initial forecast of 170 million.

Rockhopper's shares, muuch in demand among retailer punters, gained more than 50% in early trading. Less than an hour after trading began they were up 80p at 320p - a rise of a third.

But the news is likely to increase tensions between islanders and the Argentinian government, which has vowed to block oil drilling in a region it calls the Malvinas. In 1982 Argentina invaded the islands and, after a two-month war that left more than 900 dead, surrendered to Britain. However, it continues its claim to the territory.

Rockhopper's managing director Sam Moody said:

Rockhopper has now confirmed the first Contingent Oil Resource in the Falklands. Our analysis of the data from the Sea Lion well suggests that there is significant potential upside on our acreage and our technical effort will now focus on integrating all of our new knowledge of the basin so we can understand and identify the best prospects for future drilling. Being a 100% holder of this acreage potentially places Rockhopper in a very strong position. We are now looking forward to drilling Ernest and testing Sea Lion.

That test will be a key step on the road to proving commerciality for Rockhopper. The company reckons that a standalone field of 60 million barrels of oil reserves could be commercial at oil prices down to $50 per barrel.